A Battle Brews to Reform El Salvador’s Privatized Pension System

El Salvador’s pension system has become a contentious battleground in the social movement and leftist administration’s struggle to halt and roll back decades of neoliberal reforms. The economic elite, in turn, is fighting tooth and nail to maintain the long-held privileges that lined their pockets as they decimated the country’s social safety net. Ultimately, it will be a National Legislative Assembly vote that determines any revisions to the system.

In 1998, the system was partially privatized as part of sweeping US-pushed neoliberal reforms implemented under right-wing Nationalist Republican Alliance (ARENA) party administrations. The result was an unsustainable system that is strikingly unbalanced: while the public system retained the greatest number of pensioners, new contributors were syphoned into the private system; as a result, the private companies administrating pensions have raked in profits of over $250 million since the 1998 reforms, while the government has incurred millions of dollars of debt to those same private companies in order to pay out pensions to those in the public system. What’s more, private sector employers routinely pocket the monthly deductions from their employees’ salaries, instead of depositing the funds into the pension system. The 1998 reforms were imposed with the promised of expanded coverage, but today only some 25% of the economically active population is covered.

On January 21st, the Union Alliance, a broad-based collection of labor coalitions and federations representing public, private, agricultural and independent workers, met with top administration officials in the presidential offices to present a proposal to maintain a mixed public-private system, but with pensions distributed from collective funds rather than individual accounts and administered by the State rather than the current private administrators. The Alliance also demanded that the age of retirement (currently 55 for women, 60 for men) and workers’ monthly contribution amount remain the same; additionally, the groups proposed lowering the requisite years of contribution before retirement from 25 to 20, and that coverage be extended to those without formal employment who never had the opportunity to contribute to the system.

“We feel that the appropriate steps are being taken with regards to [ensuring] the social dialogue that was so fundamentally absent from the [previous pension] reform,” said Roger Gutiérrez of the Union Alliance. After months of public consultation, the government is now preparing to introduce its own official proposal, which officials say reflects the Alliance’s demands not to raise the retirement age or contribution amount, but would retain an administrative role for the private sector.

While organized labor is fighting to ensure equity and dignity for all Salvadorans in retirement, powerful private sector groups like the National Association of Private Enterprise (ANEP) and its member organization the Salvadoran Association of Pension Fund Administrators (ASAFONDOS) are lobbying to increase workers’ contributions, raise the retirement age and defend the profit-driven private pension administrators. This month, in a shocking display of corporate-media collusion, ANEP bought out the entire front page of El Salvador’s three largest daily print newspapers with a disingenuous faux headline claiming that the government is maneuvering to “steal” citizens’ pension funds.

In a recent editorial, the Jesuit Central American University (UCA) condemned ANEP’s actions: “The arguments for or against the proposed reforms should be formulated technically and thinking of the common good, in the dignity of all workers. Trying to deceive the population on such a sensitive issue through perfidious and unethical publicity is the work of those who live with their backs to El Salvador and its people.”